The impact of fical policy on economic growth in kenya 1964-1985

Abstract

This study looks at the impact of fiscal policy on economic growth in order to determine the role of fiscal policy in a developing country like Kenya. In an attempt to control or regulate the country's economic activity, the Kenyan Government through her fiscal policy measures influences domestic demand. Consequently, this study looks at the average annual fiscal policy effect on domestic demand to characterize the overall impact of fiscal policy on Gross Domestic Product (GDP). The main finding was that fiscal policy effects were positive during the period under consideration, but very small especially when you consider the share of Government sector to GDP. This show: that on average, fiscal policy pushed the economy upwards. The pure GDP growth rates showed that the economic activity without fiscal policy fluctuated highly around the average annual growth rate. Actual GDP growth rate showed small fluctuations. This portrays fiscal policy's stabilizing effects on economic growth. The actual GDP growth rate in the eighties' has a declining trend. The paper recommends that the Kenya Government should review her fiscal policies to ensure that this trend is contained or reversed. Otherwise fiscal policy had played a positive role in the economy but there is still room for improvement.